annual report on corporate governance practices … · 2020. 5. 7. · management may purchase or...

2016

ANNUAL REPORT

ON CORPORATE GOVERNANCE PRACTICES COMPLIANCE

Corporate governance, understood as the series of rules and policies regulating the structure of the governing bodies of Argos and the principles of action of its managers, constitutes a true commitment to maintaining relationships with our stakeholders, under the highest standards of transparency, respect and equal treatment of shareholders, employees, contractors and suppliers, communities and society in general.

Integrity, as an inspiring principle, is re�ected in all actions of our daily activities. The Good Governance Code contains the regulations of the General Meeting of Shareholders and the Board of Directors, and adopts general measures about governance and society, management practices, conduct of our employees, and truthful, �uent management of information. Shareholders have the right to inspect and interact with the Company, beyond the minimum requirements established by the Colombian law.

The Code contains stricter obligations than the minimum legal requirements in Colombia, heeding the advice of the Codigo Pais, the New York Stock Exchange (NYSE), the Companies Circle, and the Dow Jones Sustainability Index, among others, thus ensuring constant implementation of local and international best practices on the subject.

Annual report on corporate governance practices compliance 2016

2


CAPITALSTRUCTURE AS ATDECEMBER 31,2016

I.

CHAPTER I


b) Identity of shareholders having direct or indirect signi�cant interest as at December 31, 2016:

a) Capital and structure of the Company's property:

Common Shares:

8909002663

ID Type Name of Shareholder Shares Share%

GRUPO ARGOS S.A. 637.323.670

79.338.778

69.595.391

62.593.875

55,34%

6,89%

6,04%

5,44%

HARBOR INTERNATIONAL FUND

FONDO DE PENSIONES OBLIGATORIAS PORVENIR MODERADO

AMALFI S.A.

NIT

NIT

NIT

NIT

9008448224

8002248088

8903014430

8002297390

GOAL

FDO DE PENSIONES OBLIGATORIAS PROTECCION MODERADO

56.494.978

905.346.692

4,91%

78,62%

NIT

OUTSTANDING COMMON SHARES

SHARES WITH PREFERENTIAL DIVIDEND AND NO VOTING RIGHT

GOAL

REPURCHASED SHARES

1,151,672,310

63,575,575

209,197,850

1,424,445,735

4

b) Information of shares directly (in a personal capacity) or indirectly (through companies or otherwise) owned by members of the Board of Directors and the voting rights they represent:

Shares with preferential dividend and no voting right:

8002248088

ID Type Name of Shareholder Shares Share%

FONDO DE PENSIONES OBLIGATORIAS PORVENIR MODERADO

44.651.423

39.412.603

13.030.234

10.813.301

6.520.437

114.427.998

21,34%

18,84%

6,23%

5,17%

FDO DE PENSIONESOBLIGATORIAS PROTECCION MODERADO

FONDO DE PENSIONES OBLIGATORIAS COLFONDOS MODERADO

NORGES BANK-CB NEW YORK

FONDO DE PENSIONES PROTECCION - CEMENTOS ARGOS

NIT

NIT

NIT

NIT

8002297390

8002279406

9004318031

8001982815

GOAL

3,12%

54,70%

NIT

14991634

Identi�cation Type Nombre del Accionista Shares Type

TEICHER GRAUMAN LEON ELIAS 1.150 COMMONCC

NOTE: These shares were acquired from October 2007.


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c) Family, business, contractual or corporate relationships between signi�cant shareholders and the company, or among signi�cant shareholders.

d) Negotiations conducted by members of the Board of Directors, the Senior Management and other Managers with shares and other securities issued by the company.

e) Summary of known agreements among shareholders.

f) Own shares hold by the company.

Cementos Argos S.A. has no business or contractual relationships with signi�cant shareholders. Relationships with its related parties are always built under the

In 2016, there were no negotiations by members of the Board of Directors with shares and/or securities issued by the Company. Until the amendment to the Good Governance Code approved by the Board of Directors on December 29, 2016, the senior management was

The secretary's of�ce of Cementos Argos S.A. has not received to date any agreements among shareholders.

During 2016, there was no issue or repurchase of shares by the company.

arm's length principle and in compliance with internal / external regulations governing the matter.

forbidden to acquire and/or deal in the securities issued by the Company. From such amendment, the senior management may purchase or sale shares in the company, insofar as they meet the special conditions set forth in the new Good Governance Code.

However, as noted above, the company has 63,575,575 repurchased shares.


6

II.

CHAPTER II

STRUCTURE OFTHE COMPANY'S MANAGEMENT


a) Structure of the Board of Directors and identi�cation of origin of each of the members and the Committees set up within it. Date of �rst and subsequent appointments.

The Board of Directors of Cementos Argos is composed of seven members, all of them principals, �ve of which meet the independence criteria established in both the Colombian law and the Good Governance Code. None of the members of the Board of Directors is an employee of the Company.

Name Jorge Mario Velasquez

BOD Aspects Director No. 1

Patrimonial or independent

Patrimonial

Company Grupo Argos S.A.

Title CEO

Executive / Non executive

Non Executive

BOD Committee

Nombramientos y retribuciones

Other companies BOD

Cementos Argos S.A., Grupo Suramericana S.A., Celsia S.A., Compas S.A., Odinsa S.A.

ESG competences

Yes

Meetings attended

14/15*

Is a shareholder of a relevant vendor / customer of the company?

No

Director since Since march 2016

Camilo Jose Abello Vives

Director No. 2

Patrimonial

Grupo Argos S.A.

Corporate Matters Vicepresident

Non Executive

Sostenibilidad y Gobierno Corporativo

Cementos Argos S.A., Compas S.A., Pactia S.A.S.

Yes

14/15

No

Since march 2012 (reelected on Shareholder General Meeting 2014)

Cecilia Rodriguez Gonzales Rubio

Director No. 3

Independent

Corporación Bioparque

President

Non Executive

Sostenibilidad y Gobierno Corporativo

Cementos Argos S.A., Bioparque Proyectos S.A.S., Fundación Botánica y Zoologica de Barranquilla

Yes

14/15

No


Claudia Beatriz Betancourt Azcarate

Director No. 4

Independent

Amal� S.A.

General Manager

Non Executive

Auditoría y Finanzas

Cementos Argos S.A., Gases de Occidente, Promigas S.A. y Sociedad Portuaria de Cartagena

Yes

14/15

No


Leon E. Teicher Grauman

Director No. 5

Independent

Independiente

Independent

Non Executive


Cementos Argos S.A., Continental Gold (Canadá)

Yes

15/15

No


Esteban Piedrahita Uribe

Director No. 6

Independent

Cámara de Comercio de Cali

President

Non Executive


Cementos Argos S.A., y Centro de Eventos Valle del Pací�co S.A.

Yes

13/15

No

Since march 2012 (reelected on Shareholder GeneralMeeting 2014)

Carlos Gustavo Arrieta Padilla

Director No. 7

Independent

Arrieta, Mantilla y Asociados

Partner

Non Executive

Nombramientos y retribuciones

Cementos Argos S.A.

Yes

13/15

No


*Former and current CEO attendance average


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i. Support committees of the Board of Directors:

The Board of Directors has three support committees, as de�ned in our Good Governance Code, which are designated by it and composed by members of the Board and of�cials of the Company:

Its role is to support the Board of Directors in supervising the effectiveness of the internal control system, the decision making in relation to control, and the improvement of activities of the Company, its managers and directors. It is currently made up of three members of the Board of Directors, including all those considered independent. Pursuant to the Colombian law, this Committee must meet at least once every quarter.

The committee does not substitute the roles of the Board of Directors or the Management in supervising and performing the internal control system, but it orders and monitors that internal control procedures adjust to the needs, goals, and strategies of Argos.

The duties of this committee were rede�ned in the Good Governance Code approved by the Board of

Audit, Finance and Risk Committee

Directors on December 29, 2015, seeking to strengthen the control architecture of the company.

One of the main duties of this Committee, with regard to sustainability, is to supervise the internal control structure of Argos in order to establish whether the designed procedures reasonably protect the company’s assets and whether there are any controls to check if transactions are being appropriately authorized and recorded. In addition, it must ensure transparency in �nancial information prepared by the company and its adequate disclosure, promoting appropriate management of �nancial and other risks associated therewith. For this, it monitors that the necessary controls and adequate tools are in place to verify whether �nancial statements disclose the position of the company and the amount of its assets.

All members of the Board of Directors hold non-executive positions. They were reelected at the General Meeting in March 2014 and make part of the Board since March 2012, except for Ms. Claudia Betancourt, who has been a member since 2009, and Jorge Mario Velasquez who was elected on march, 2016.

They all have skills and experience related to economic, environmental, and social impacts and none of the members is a shareholder of any signi�cant suppliers or customers.


9

Its mission is to support the Board of Directors in its special duties of establishing policies and rules for the hiring, remuneration and development of the company’s executive staff, in addition to continuously monitor the goals of the different compensation programs in relation to the performance of of�cials. It also decides on and recommends to the Board of Directors the adoption of different compensation and remuneration programs for the staff concerned, as well as the assessment of effectiveness of these programs.

The duties of this committee were rede�ned in the Good Governance Code approved by the Board of Directors on December 29, 2015, giving it a prominent role in the process of nominating members of the Board of Directors and drafting the Remuneration and Succession policy for this body.

With regard to sustainability, this Committee is in charge of propose to the Board the Remuneration and Succession policy for the Board of Directors, which shall be approved by the Meeting of Shareholders, and approving the succession scheme of the senior management, assessing the performance of the senior management, and proposing the appointment and removal of the president of the company.

Currently, the members forming the Board of Directors are:

Appointment and Remuneration Committee


(meets independence requirements until march,2017)

(Independent Member)

(Independent Member)

ESTEBAN PIEDRAHITA URIBE

LEON TEICHER

CLAUDIABETANCOURT

(meets independence criteria)

CARLOS GUSTAVOARRIETA JORGE MARIO

VELASQUEZ


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NOTE: Per the previous analysis made by the Appointments and Compensation Committee of the Board members' resumes, there are no gaps between the pro�les of current members and those established in the Code of Good Governance.

Its objective is so support the Board of Directors in aspects such as reviewing the performance of directors; promoting training of directors; supervising processes of the Board of Directors; enforcing the Good Governance Code, the Conduct Code and antifraud, anticorruption, anti-money laundering and anti-terrorism �nancing policies; and monitoring the purchase and sale of securities by directors and employees. It also has the duties of guiding, monitoring, and following up on best sustainability practices.

This Committee is made up of two members of the Board of Directors and meets quarterly.


Sustainability and Corporate Governance Committee

(meets independence criteria)

CECILIARODRIGUEZ CAMILO JOSE

ABELLO

Inde

pend

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Othe

r Boa

rds

Expe

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Risk

Cont

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Corp

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nanc

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Trad

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mm

erci

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Indu

stry

Cris

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anag

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Lega

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Expe

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Gove

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ent /

Pub

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Inte

rnat

iona

l

Geog

raph

ic

Gend

er

Jorge Mario Velasquez

Camilo Jose Abello Vives

Cecilia Rodriguez Gonzalez Rubio

Leon E. Teicher Grauman

Esteban Piedrahita Uribe

Carlos Gustavo Arrieta Padilla

DIRECTOR

SKILL, EXPERIENCE AND EXPERTISE DIVERSITY

x

xx

x

x

x

x

x

xx

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

xx

x

xx

x

xx

x

x

x

x x

x

x

x

x

x

x

x

x

x

x

x

x

COL

COL

COL

COL

COL

COL

COL

M

M

F

F

M

M

M

x

x

x

x

x

x

x

x

x

CEMENTOS ARGOS S.A.BOARD OF DIRECTORS SKILL MATRIX

Claudia Beatriz Betancourt Azcarate

Our current Board of Directors covers all the required skills to be part of this body, according to the skills and pro�les included in our Good Governance Code (Chapter 3), as detailed in the following matrix:

ii. Matrix of pro�les and skills of the members of the Board of Directors


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Curricula vitae of the members of the Board of Directors of Cementos Argos S.A. may be consulted on our website: http://www.argos.co/ir/gobierno-corporativo/junta- directiva

In 2016 there was a change in the composition of the Board of Directors, due to the resignation of Dr. Jose Alberto Velez, who was replaced by Dr. Jorge Mario Velasquez.

There are no members of the Board of Directors of our parent company Grupo Argos S.A. in the Board of Directors of Cementos Argos S.A. or holding executive positions therein.

b) Curricula vitae of the members of the Board of Directors.

d) Members of the Board of Directors of the Parent Company that are part of the Boards of Directors of Subordinate companies or hold executive positions therein (in case of Conglomerates).

c) Changes in the Board of Directors during the year. In 2016, the Board of Directors approved the following policies:

e) Policies approved by the Board of Directors during the reported period.

Productive Transformation Plan - Argos BEST Materiality policy Strategy: medium-term plan Strategic Focuses of the Company Model of quanti�cation of strategic risks Risk rating and measurement criteria Annual Internal Audit Plan Compliance Management in the Company and its subordinates


12

Aspects related to sustainability were present in all the meetings of this body, where environmental, industrial safety, occupational health, �nancial result, risk, audit and transparency issues, etc., were discussed. For example, all the sessions of the Board of Directors start with a report on industrial safety and occupational health. Additionally, the Sustainability and Corporate Governance Committee of the Board of Directors thoroughly reviews the performance of the Environmental Policy and is informed of the main social issues related to its operations. Furthermore, the Audit, Finance and Risk Committee analyzed the main risks to which we are exposed and their management from a strategic perspective, and monitored the internal control system of the company.

Considering that the Board of Directors is the body in charge of de�ning the main long-term policies and strategies of the company, its members are the most important managers and promotors of corporate governance and compliance therewith. It is also responsible for ensuring that the company remains at the forefront in the implementation of the highest standards on the subject.

Pursuant to the Colombian regulations applicable to Argos, and the provisions in our Bylaws, the election of members of the Board is carried out by applying the electoral quotient system based on the lists of candidates submitted by shareholders, who consider aspects contained in the Good Governance Code in the nomination process, such as experience in participating in other boards of directors, professional specialties relevant to the Company’s business, basic skills for appropriate performance, abilities to

f) Process of appointing members of the Board of Directors.

understand and question �nancial information and business proposals, and competencies to work in an international setting.

Additionally, it must be ensured that at least one of the members is an expert in corporate �nance and/or internal control, and that at least half of them qualify as independent members, in the terms established in Law 964 of 2005 by legislation of the Colombian Stock Exchange. This percentage is well above that required by the Colombian standard (25%).

Our Board of Directors is composed of seven members (two of whom are women) without alternates, elected for periods of three years and inde�nitely eligible for re-election. Nevertheless, the General Meeting of Shareholders may remove members individually at any time.


13

The Board of Directors is currently made up of individuals from different backgrounds and with different knowledge. To provide just a few examples, Carlos Gustavo Arrieta is a lawyer that has been a partner of the �rm Arrieta Mantilla for many years, but also served as Attorney General of the Nation and Ambassador in the Netherlands. Cecilia Rodriguez is an expert in social and environmental affairs and was Minister of the Environment. Esteban Piedrahita is an economist and held the position of National Director of Planning. Camilo Abello, lawyer, knows the cement industry in detail because, before becoming the Vice President of Corporate Affairs of Grupo Argos, he had worked in our Company for 20 years. Leon Teicher worked in the technology sector for many years and later served as president of Cerrejon. Claudia Betancourt has spent most of her career working in the �nancial sector and therefore is very knowledgeable in this �eld. Jorge Mario Velasquez is a civil engineer, he was in the Company for more than 30 years, having been president in the last 4 years, and is currently president of our parent company, Grupo Argos.

Thus, our Board of Directors is made up of people of different genders, with valuable track records and wide experience in both the public and private sectors.

We believe that the independence of most members of the Board of Directors is a factor that adds value to business management analysis and strategic planning of the company. Therefore, we established a rule according to which members lose their condition as independent when they have held their position for three consecutive periods, aiming to maintain high levels of independence among the members of the Board.

The members of the Board must certify that they do not have any con�icts of interests with the Company or the institutional funds that are shareholders thereof, disclosing any relationship that may in�uence their opinion or vote.


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g) Remuneration policy of the Board of Directors.

The General Meeting of Shareholders establishes and sets the remuneration considering the structure of the Board of Directors and the obligations of its members, as well as their personal and professional quali�cations, time devoted to their role, and size and complexity of the company’s operations.

The amendment to the bylaws submitted to the General Meeting of Shareholders 2015 approved the preparation of the Remuneration and Succession Policy for the Board of Directors. It shall include all the remuneration

components to be considered at the time of determining the remuneration for the members of the Board of Directors, per their dedication and responsibility, as well as the components in functional and personal pro�les, time and dedication necessary for the members of the Board to ful�ll their obligations properly. This Policy shall be proposed to the General Shareholders Meeting by the Board of Directors based on the Appointment and Remuneration Committee s proposal.

h) Remuneration of the Board of Directors and members of the Senior Management.

In 2016, the members of the Board received a monthly remuneration of 4.5 million Colombian pesos, plus an additional compensation of 6 million Colombian Pesos for their participation in the support committees of the Board of Directors (not applicable to members of Grupo Argos). While it is allowed by our Good Governance Code, as of this date the remuneration scheme of the Board of Directors does not have a variable component. These payments can be veri�ed in the Annex to the 2016 integrated report containing the �nancial statements and their notes. http://www.reporteintegradoargos.com

Payments to senior management are also included in the Annex to the 2016 integrated report containing the �nancial statements and their notes, and in Article 446 of the same document. http://www.reporteintegradoargos.com


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i) Quorum of the Board of Directors.

“Article 48. The Board of Directors shall meet regularly at least once a month, in accordance with the annual calendar it approves, and may hold special meetings when it so decides or when convened by the President of the Company, the Statutory Auditor or three (3) of its members. Distance meetings will also be valid in the terms authorized by the Law.

Regular and special meetings of the Board of Directors shall be convened by any means without any speci�ed term for convening.

There shall be quorum with the majority of its members and this absolute majority shall be needed to approve decisions.”

According to Article 48 of our corporate bylaws:


16

j) Information of attendance at the meetings of the Board of Directors and the Committees.

During 2016, the Board of Directors met 15 times, both in person and remotely, with an average attendance rate of 92.38%. A breakdown by member of the Board is shown in the chart of Chapter II of this report. In the committees:

l) Secretary of the Board of Directors (duties and key issues).

The secretary of our Board of Directors is Mr. Juan Luis Munera, Vice President of Legal and Institutional Affairs. His duties are de�ned in Article 61 of the Company's bylaws as follows:

“Article 61. The Company shall have a Secretary General who will act as Secretary of the General Meeting of Shareholders and the Board of Directors. His/her duties and powers shall be as stipulated in the Operating Rules of the Board of Directors.

The Secretary General will be a high-level employee of the Company appointed by the Board of Directors, as proposed by the President of the Company and based on the opinion of the Appointment and Remuneration Committee.”

Some of the duties assigned to the Secretary in the Good Governance Code, 10.3, are:

Audit, Finance and Risk: 4 meetings were held with an average attendance of 100%.

Appointments and Remunerations: Four meetings were held with 100% attendance.

Sustainability and Corporate Governance: Two meetings were held with 100% attendance.

k) Chairman of the Board of Directors (duties and key issues).

The chairman of our Board of Directors is Mr. Jorge Mario Velasquez, president of our parent company Grupo Argos S.A. His duties are de�ned in Article 47 of our bylaws:

These duties were included in the amendment to the bylaws approved by the General Meeting of Shareholders 2015 as part of the plan for implementing certain measures of the new Codigo Pais by the Financial Superintendency of Colombia.

1. Convene meetings directly or by means of the Secretary of the Board of Directors.

2. Chair the meetings and manage debates.

3. Prepare the Agenda in cooperation with the President of the Company and the Secretary of the Board of Directors.

4. Ensure that the Board of Directors ef�ciently �xes and implements the strategic direction of the company.

5. Coordinate and plan the operation of the Board of Directors by establishing an annual work plan based on the assigned functions.

6. Ensure timely delivery of information to the members of the Board of Directors, directly or by

means of the Secretary of the Board of Directors.

7. Ensure performance of the agreements of the Board of Directors and monitor its commissions and decisions.

8. Monitor active participation of the members of the Board of Directors.

9. Lead the annual assessment of the Board of Directors and Committees, except for their own assessment.

1817


1918

a. Convene the meetings according to the Action Plan approved by the Board of Directors.

b. Deliver in timely manner the information to the Directors.

c. Retain corporate documentation, duly record the development of sessions on the book of minutes, and bear witness of the agreements of the corporate bodies.

d. Ensure that the actions of the Board of Directors adjust to the applicable regulations and guarantee that its procedures and governance rules are respected and regularly reviewed, as provided for in the Bylaws and other internal regulations of the Company.

e. Participate in the Support Committee of the Board of Directors to which it is designated.

f. Encourage and inform the Board of Directors of progress and trends concerning corporate governance matters.

g. Deal with con�icts of interests that may arise within the Company and are to be brought to the attention of the Board of Directors.

h. Inform the Board of Directors of the stock registration system and control situations in the company.

i. Provide legal advice to the Board of Directors and submit reports on legal matters of material importance to the business of the Company and the actions of managers.

j. Communicate the decisions of the Board of Directors to the different areas and of�cials of the Company.

k. Perform the duties delegated to it by the Board of Directors.

These duties were rede�ned in the Good Governance Code 2015 as part of the plan for implementing certain measures of the new Codigo Pais by the Financial Superintendency of Colombia.


m) Relationships of the Board of Directors with the Statutory Auditor, �nancial analysts, investment banks, and rating agencies during the year.

The Statutory Auditor attended 3 out of 4 meetings of the Audit and Finance Committee held in 2016.

n) External advice received by the Board of Directors.

As part of the annual training plan for members of the Board of Directors, during 2016 the Directors received advice from expert lawyers, �nanciers and investment banks on inorganic growth strategy, especially for the acquisition of assets in Martinsburg.

o) Information management by the Board of Directors.

Our Board of Directors has a special application that is run on a computer environment to allow further, friendlier interaction with our Directors, while con�dentially storing documentation necessary for timely decision making by our Board. This application not only allows the Board to see relevant legal documentation or information, but also �nancial, technical and market information necessary for the ful�llment and exercise of its duties. Likewise, through the application, they are informed of relevant news related to Company matters

p) Activities of the Committees of the Board of Directors.

MAINISSUES 2016

COMMITTEES AUDIT AND FINANCE APPOINTMENTAND REMUNERATION

SUSTAINABILITY ANDCORPORATE GOVERNANCE

Reports on Financial Statements

Regional CCA Vice-presidentSelection and Appointmentprocess

Board of DirectorsSelf-assessment

Materiality Policy

Report of the StatutoryAuditor

Reports of the InternalAuditor / Annual Audit Plan

Strategic risk management

Monitoring process to thevariable compensation (PRO)

Grupo Argos companiesRelationship policy

Follow-up of the Successionprocess for the Argos Presidency

Dow Jones SustainabilityIndex – DJSI Resultanalysis

Innovation Vice-presidentselection and Appointmentprocess

Policy on Appointments,Compensation andSuccession of the Boardof Directors

Succession policies fosenior management

Internal control gapanalysis

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q) Information on the conduct of assessment processes with the Board of Directors and the Senior Management, and summary of results.

To know the performance of the Board of Directors during certain period, we alternately conduct external assessments and self-assessments. Through these mechanisms, we examine the operation of the Board as a collegiate body and the performance of each of its members, rating their level of involvement and participation in the de�nition of the Company’s strategy, including environmental, social, industrial safety and governance issues.

Our Good Governance Code 2015 changed the manner of assessing the performance of the Board of Directors, which was conducted in the middle and at the end of the period; now this system operates as set forth in Chapter III (17) of this document:

“The Board of Directors as a body and each Director considered individually will be assessed annually, alternating self-assessment with external assessment. The external assessment will be conducted by an independent �rm and a summary of the conclusions of such assessment will be submitted to the General Meeting of Shareholders in the regular session for electing the Board, in addition to being published on the website of the company.

The assessment scheme adopted shall ensure the analysis of dedication and performance of Directors.

The General Meeting of Shareholders shall be informed by the management of the operation and main activities carried out by the Board of Directors, the Board committees and the President of the Company in the previous period.”

The external assessment will be conducted by an independent �rm and a summary of the conclusions is submitted to the General Meeting of Shareholders in the session for electing the Board. At the 2014 Meeting, where the current Board was reelected, the conclusions of the external assessment conducted in 2013 were presented.

In 2013, in compliance with the provisions of the Good Governance Code, the �rm PROSPECTA was hired to carry out the external performance assessment of the Board of Directors of Cementos Argos S.A., which diagnosed the performance of the Board of Directors at the time of assessment and suggested opportunities for improvement in line with international best practices.

The factors considered by the Prospecta methodology were Structure/Government; Coordination; Interaction and Strategic Focus, which then were grouped into 37 speci�c performance items. These were assessed to obtain the status of compliance with international standards or best practices on the part of our Board of Directors.

Because of the assessment, our Board was classi�ed as a superior, young mandate body,

211920


1. Take a more strategic approach

Priority areas for improvementaccording to 2013 evaluation

Questions Sections /Self-assessment 2016

A. Follow-up to the recommendations of theExternal Evaluation 2013

2. Clarify the Chairman s role B. Identi�cation of group performanceimprovement areas

3. Strengthen the position of theindependent members

C. Identi�cation of individual performanceimprovement areas

4. Provide guidelines on the managementof Board of Directors information

D. Board Members principal areas of interestand concerns

5. Expand the approach of the CorporateGovernance Committee to one ofSustainability

Final Section

221821

where there is a good level of compliance with all areas analyzed. The Company’s efforts for re-designing this body and being at the forefront of corporate governance issues were highlighted; therefore, our Board of Directors has solid foundations to demonstrate their fundamental strengths in teambuilding.

Based on the external assessment report, we de�ned some opportunities for improvement that have been implemented since 2013 and throughout 2014 and 2015, including, without limitation, changes in the roles and name of the Sustainability and Corporate Governance Committee; deepening of risk management; expanded corporate governance focus; and improvement of the platform for interacting with members of the Board of Directors, aiming at

further prior information and friendlier access to documents of past and future meetings and real-time interaction during voting.

In 2016, we continued with the Board's self-assessment process, which was methodologically followed by the external consulting �rm AT Kearney, which was merged in Colombia with Prospecta, a �rm that has been accompanying the Board's evaluation process since 2013, when the �rst external assessment of this body was carried out.

The structure of the self-assessment was focused on the priority areas of opportunity identi�ed in 2013, as follows:


The main results of the 2016 Board self-assessment are:

a. The implementation of 4 of the 5 recommendations made in 2013 meets the expectations of the Directors.

b. The Directors reported advanced stages of performance in an open culture to the debate and about the role of the Chairman; And they dissent on the performance stage of the annual plan of the Board as well as about risk managemnt.

c. More than half of the members think they could improve on monitoring indicators, analyzing risks and developing an annual plan.

d. Half of the members believe that they participate critically and proactively on the Board, and most are considered critical and /

or creative.

e. Except for sending information that they think could improve, the support functions meet or exceed the expectations of the majority.

23211922


RELATED PARTYTRANSACTIONS

III.

CHAPTER III


a) Powers of the Board of Directors on such operations and con�icts of interest.

The duties of the Board of Directors regarding related party transactions and con�icts of interest include issue of an opinion by the Audit, Finance and Risk Committee, through a written report, on possible relevant transactions that are planned to entered into with related parties and are not part of the normal course of business, may occasionally take place in conditions other than arm's length, or may even alter equal treatment of shareholders. The authorization of such relevant transaction(s) is granted by the General Meeting of Shareholders based on this report. The Board of Directors approves other related party transactions that fall within its competence.

All related party transactions made are duly documented in our �nancial statements and their notes, as well as the Group Report under Article 29 of the Commercial Code.

Regarding con�icts of interest as required by our Good Governance Code, our Directors must:

a. Refrain from participating, on their own behalf or by proxy, for a personal bene�t or in favor of a third party, in business involving competition with the Company or acts regarding which there is a con�ict of interest.

As for con�icts of interest of our employees, the Business Conduct Code sets the criteria for identifying a con�ict of interest and the procedure for disclosing it, the Audit, Finance and Risk Committee being the highest body for disclosure and handling of con�icts of interest of the senior management.

The Board of Directors, the senior management and the of�cials of Cementos Argos must annually complete the form “Statement of Potential Con�icts of Interest” or every time there is a situation that could lead thereto.

b. Adequately disclose con�icts of interest with the Company. Be alert and careful in handling any of these events, describing the situation on a formal session of the Board of Directors, documenting the con�ict and refraining from voting on the matter. To this end, members shall inform the Board of direct or indirect relationships among them or with the Company, suppliers, customers or any other stakeholder that may result in con�icts of interest or in�uence their opinion or vote.


24

b) Details of the most relevant Related Party transactions in the opinion of the company, including transactions among companies of the Conglomerate.

The breakdown of transactions made among the companies of Grupo Empresarial Argos is included in the Special Report prepared under Article 29 of Law 222 of 1995, which makes part of the documentation made available to shareholders for the right of inspection on the website of the Company: http://www.argos.co/ir/gobierno-corporativo/asamblea-de-accionistas, and shall be delivered to the shareholders with the documents of the Meeting.

c) Con�icts of interests occurred and actions of the members of the Board of Directors.

During 2016, there were no con�ict of interests reported by members of the Board of Directors.

d) Mechanisms for resolving con�icts of interest among companies in the same Conglomerate and their application during the year.

All transactions with companies of Grupo Empresarial Argos must be made at arm's length and, when there is a signi�cant transaction that does not meet this condition, it must be approved by the General Meeting of Shareholders. In any case, our Business Conduct Code establishes when we could be facing a potential con�ict of interest and out duty to disclose it to the Company. In 2015, our parent company Grupo Argos, in compliance with the new measures of Codigo Pais, designed a Relationship Policy for the Grupo Empresarial Argos to provide further transparency to this mechanism, which is being reviewed for adoption by the Af�liates. This Policy were approved in 2016 by the Cementos Argos Board of Directors.

During 2016, there were no con�icts of interest between Cementos Argos and the companies of Grupo Argos.


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RISKMANAGEMENT SYSTEM OF THECOMPANY

IV.

CHAPTER IV


a) Explanation of the Internal Control System (ICS) of the company.

Cementos Argos has adopted the COSO and COBIT models, which are internationally recognized as good practice, to design and manage our internal control system seeking to ensure ef�ciency and effectiveness of our operations, reliability of information we generate, and regulatory compliance in all our actions in a reasonable manner. Hence, our structure is supported by the roles of the Audit, Finance and Risk Committee of the Board of Directors, the Internal Audit Management Of�ce, the Risk Management Of�ce and the Compliance Management Of�ce.

The duties of the Audit, Finance and Risk Committee of the Board of Directors include supporting the Board of Directors in supervising effectiveness of the Internal Control System by ordering and monitoring that internal control procedures adjust to the needs, objectives, goals, and strategies determined by the Company and are framed within the internal control objectives, that is, ef�ciency and effectiveness of operations and adequacy and reliability of �nancial reporting.

The Audit Committee quarterly provides guidance and monitoring on the elements, tools and management of the internal control system. The main aspects monitored by this Committee comprise work plans of Internal Audit and Statutory Audit, accounting policies, signi�cant changes in the �nancial statements, assessment methodology of the internal control system, risk management methodology, results of assessments conducted by the Internal Audit and Statutory Audit of Cementos Argos and its subordinates, implementation of action plans, fraud prevention and response program, including behavior of the Transparency Hotline and resolution of cases reported through it.

The Audit Management Of�ce conducts an independent assessment of governance,

risk and control items needed to manage business processes permanently. As a result of these assessments, we identi�ed best practices taking place in the company as well as opportunities for improvement required to achieve the objectives of each process and the business itself. These improvements have been made or are being implemented, and are also subject to follow up by the audit team and the Senior Management.

In turn, and to achieve proper coordination and information �ow on the risks of the organization, process owners (president, vice presidents and managers) have been designated as the persons responsible for risks at the different business units. Additionally, risk managers have been appointed in every vice presidency in order to have expert staff supporting risk management in processes and projects; they are essential to communication between different business units and the Risk Management Of�ce, which directly reports to the Audit, Finance and Risk Committee and functionally depends on the Presidency.

Regarding the Compliance Management Of�ce, it is responsible for promoting policies de�ned by government entities at a corporate level in relation to corporate governance, transparency and conduct;


2827

legal and regulatory compliance; anti-fraud, anti-corruption, anti-money laundering and anti-terrorism �nancing, thus promoting a culture of compliance in the Company.

Finally, an internationally prestigious �rm appointed by the General Meeting of Shareholders was commissioned the Statutory Audit of Cementos Argos. To ensure its independence, the Statutory Auditor is forbidden to provide services other than those related with its position to companies of the Conglomerate. During 2014, the Statutory Auditor was not involved in any incompatibilities or disquali�cations prescribed by the law.

In addition, it is contractually established that in the event of successive reelections, individuals appointed to serve as principal and alternate must be changed at least every 5 years and that such individuals may only serve as statutory auditors of the Company within at least 2 years of leaving of�ce.


2928

b) Description of the risk policy.

Risk management in our company is a fundamental tool to work with reasonable assurance on the development of our strategy and operations. It is supported by the Integrated Risk Management System (IRMS), based on the standards ISO 31000 and COSO Enterprise Risk Management and coordinated with the GRC (Governance, Risk and Compliance) model that we are currently implementing.

The IRMS is focused on identifying relevant risks from a strategic perspective, which results in risk management by processes, projects and facilities in all our operations, as well as in corporate governance, sustainability and business continuity. This focus allows to align relevant aspects, such as environmental management, communities, safety, regulations, and �nance, etc., with a global management focus supporting successful performance of our strategy.

Strategic risks:

1. Decrease in market share and/or expected pro�tability due to inef�ciency in the supply chain to meet the demand.

2. Failure to obtain, penalties on or loss of licenses, permits, certi�cations or concessions required for the operation due to breach of legal, mining or environmental parameters.

3. Impact on the safety of our employees, assets and facilities.

4. Environmental impacts due to mining and industrial activities.

5. Changes in applicable regulations and standards.

6. Impact on availability, integrity or con�dentiality of information of the Company, its customers or suppliers.

7. Serious impact on reputation before the different stakeholders.

8. Penalties and impact on image derived from investigations under competition laws.

9. Interaction with communities in the areas of in�uence of the operations.

10. Market risks (competition, imports, new players, substitutes and prices).

11. Risks associated with global, national and regional geopolitical variables.

12. Risks associated with variables and �nancial management (liquidity, market, credit and exchange rate).

13. Impact on operations due to acts of God.

14. Risks of fraud and/or misconduct of customers, suppliers, of�cials, partners and/or third parties.

15. Risks associated with supply, reliability and cost variability of energy resources for operations and their ef�cient use.

16. Human resource management not aligned with the objectives and needs of the business.


302829

The governance framework of the Integrated Risk Management System includes four essential bases for its sustainability, which annually give rise to different action plans for its strengthening:

• The Risk Policy: Establishes elements and general framework of action, expectations regarding risk management, levels of attribution and responsibility for risk management and monitoring, which is complemented by the methodology set out in the Integrated Risk Management Manual.

• The de�nition of roles and responsibilities for risk managemen: Considers the duties of the Board of Directors and the Audit, Finance and Risk Committee, the President and the Steering Committee, the vice presidencies and process owners, the Risk and Internal Audit Management Of�ce about risk management in the company.

• The IRMS methodology: Focused on applying qualitative and semi-quantitative models for risk management to be homogeneous across business units and allow consolidation of corporate risks by using our tools (risk matrix, controls and control panel), where risks, their assessment and management are recorded. This methodology enables the creation of speci�c risk-based models that are management tools for speci�c, cross-cutting aspects of the organization, such as those related to processing of mining licenses, community relations and strategic project planning methodologies. In addition, quantitative models associated with risk of treasury.

• The cultural component: Key to achieving the objectives of our company's risk management model and subject to continuous strengthening through

strategies of training, communication and involvement of employees from all levels.

To achieve proper coordination and information �ow on the risks of the organization, process owners (president, vice presidents and managers) have been designated as the persons responsible for risks at the different business units.

Additionally, risk managers have been appointed in every vice presidency to have expert staff supporting risk management in processes and projects; they are essential to communication between different business units and the Risk Management Of�ce, which directly reports to the Audit, Finance and Risk Committee and functionally depends on the Presidency


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d) Response and monitoring plans for main risks.

Based on the 16 strategic risks previously identi�ed by the Company, mitigation strategies are developed at the strategic, tactical and operating levels through the identi�cation of correlations among strategic risks, project risks, processes and facilities, and respective actions at each level. Thus, we ensure that operations carry out activities aimed at preventing the occurrence of risks that directly affect achievement of objectives and sustainability in the short, medium and long term. The risk management model is supported by the responsibility of the process owners to manage their own risks. Below are the strategic risks and key mitigation actions implemented in the organization:


322831

STRATEGIRISK BRIEF DESCRIPTION MITIGATION ACTIONS POSSIBLE CONSEQUENCES

Supply chainDecrease in market share and/or expected pro�tability due to inef�ciency in the supply chain to meet the demand

Risk stemming from not having the necessary production capacity available (raw materials, production infrastructure, logistic resources and distribution channels) to meet the demand in a timely and ef�cient manner in the markets where we operate, in order to obtain / maintain the market share and expected pro�tability

- Sales forecast model, which is periodically tested for adjustment.- Integrated processes of supply chain planning and production planning.- Methodology for strategic project planning (Master Plan).- Planning of long- and short-term mining resources.- Insurance coverage scheme for insurable risks.

- Decrease in market share.- Decrease in pro�tability due to excessive operating costs.- Stoppage of operations due to an insuf�cient chain supply of raw materials.- Loss of customers.- Impact on reputation.

Loss of licenses or titlesFailure to obtain, penalties on or loss of licenses, permits, certi�cations or concessions required for the operation due to breach of legal, mining or environmental parameters

Risk of not having the licenses, permits, certi�cations or concessions required for the operation, due to non-granting, expiry, loss or penalty for breach of parameters associated to mining titles, environmental licenses, BASC certi�cations, ISPS certi�cations, free-trade zone licenses or otherwise

- Monitoring of compliance with authorizations required for the operation and associated obligations.- Power scheme for decision-making based on levels of risk exposure. - Committee for monitoring mining titles with a quarterly report to the Steering Committee and the participation of multidisciplinary, cross-cutting teams.

- Cessation of operations due to a lack of operating licenses or permits.- Shortages of raw materials and aggregates.- Impact on reputation due to loss or denial of licenses or declaration of revocation.- Penalties, �nes and legal actions related to breaches associated with licenses or concessions.

SISO and securityImpact on the safety of our employees, assets and facilities

Comprising risks of industrial safety and occupational health, and security of people, assets and facilities

- Ongoing excellence project on Industrial Safety and Occupational Health. - SISO policies and standards, training, assessment and monitoring of permanent compliance.- Identi�cation, rating and prioritization of Occupation Risk control.- De�nition and disclosure of emergency plans and safety protocols for people and facilities.

- Loss of human lives, disability or injuries due to the operations.- Impact on reputation related to the safety of employees, assets and facilities.- Interruption of operation due to lack of safety conditions.- Losses due to physical impact on assets and facilities.


332932

Impact on the environmentEnvironmental impacts due to mining and industrial activities

Risks associated with environmental impacts caused by our operation. Comprises negative effects due to land use, impact on biodiversity and water resources, in addition to emission of air pollutants, including greenhouse gases contributing to phenomena like weather change

- De�nition, dissemination and monitoring of the environmental policy.- Monitoring and update of compliance with legal and voluntary Environmental Commitments.- Dissemination and training program on the environmental component in the Argos culture.- Implementation of projects for preventing, mitigating, correcting and compensating environmental impacts.

- Impact on reputation due to environmental impacts caused.- Penalties, �nes and legal actions related to environmental impacts.- Interruption of operations.

Changes in regulationsChanges in applicable regulations and standards

Risks derived from changes in current regulations in the countries where we operate and the industry standards that position as best practices. These regulations or standards may be environmental, mining, tax, monetary, etc

- Permanent monitoring of regulatory change projects and changes of regulations through media subscriptions and specialized external advisors.- Links with SCI, DJSI, CEO Water Mandate and other industry programs that allow to anticipate changes in standards.- Active participation and leadership in industry associations.- Information system and permanent communication with ICONTEC.

- Interruption of operations or loss of license due to failure to comply with new regulations or standards.- Penalties, �nes or legal actions due to breach of new regulations.- Financial impact as a result of increased costs or investments for complying with new regulations.

Information Security Impact on availability, integrity or con�dentiality of information of the company, its customers or suppliers

Risk associated with events affecting availability, integrity or con�dentiality of information of the company, its customers or suppliers, as well as loss or leakage of information managed electronically or physically

- De�nition, performance and dissemination of Document Management by process.- Management of centralized logic access, identity administration and action against information leakage.- Identi�cation and classi�cation of information assets.- Strategy for strengthening information security culture.

- Interruption of operation due to loss of information affecting processes.- Errors or inaccuracies in the �nancial information of the company.- Penalties, �nes or legal actions due to loss of customer information or leakage of sensitive information.- Impact on reputation due to information leakage.- Impact on reputation due to loss of third parties' information.- Internal or external fraud.



342833

Impact on reputationSerious impact on reputation before the different stakeholders

Risk derived from any event that may negatively affect the reputation or image of the company. This risk may be the result of the materialization of any other risk of the company

- Crisis management manual considering scenarios associated with events occurred in productive processes.- Relationships with control and surveillance entities.- Media plan and authorized spokespersons.- Sustainability dialogs / relationship with communities.

- Loss of customers and market share.- Impact on the value of the Company's shares.- Negative image among shareholders, investors and stakeholders.

Competition lawsPenalties and impact on image derived from investigations under competition laws

Risk derived from unfavorable opinions regarding commercial or business actions that authorities deem contrary to the regulations and good customs of fair competition and free market competition

- Commercial and competition policies de�ned and disseminated.- Training of sales force.- Pricing committee.- Program for compliance with competition regulations.

- Penalties, �nes and legal actions related to competition laws against the company and its executives.- Impact on �nance and the value of the Company's shares.- Negative image among shareholders, investors and stakeholders.

CommunitiesInteraction with communities in the areas of in�uence of the operations

Risks derived from interactions with communities in areas of in�uence that may involve an impact on normal operation of the Company and/or some of it facilities due to occasional blockades, claims before authorities, unfavorable media references, etc., whose causes may be related to failure to mitigate or compensate our impacts or to social demands exceeding the role of the private company

- Risk-based community management model.- Model for responding to complaints and suggestions of the community.- Identi�cation of key local actors and relationship plan.- Third party liability and loss of pro�t policies.- Agreements with municipal or governmental authorities for implementing social projects.

- Negative effect on reputation due to impact on communities caused by the operations of the company.- Penalties, �nes and legal actions related to community impacts.- Interruption of operations and projects due to blockades and protests by the communities of in�uence.



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Competition, import, playersMarket risks (competition, imports, new players, substitutes and prices)

Refers to events affecting the performance or maturity of the market because of arrival of new competitors, strengthening or expansion of current competitors, pricing behavior and strategies of competitors, international price volatility affecting the behavior of imports, and the incidence or development of new products that could replace cement and concrete

- Monitoring of markets through business intelligence . - Strategy for strengthening sales force.- Expansion projects for cement and concrete plants, �eets, operations in intermediate cities.- Pricing committee and public affair committee.

- Decrease in market share.- Loss or reduction of income due to increased competition, substitutes or changes in market prices.- Stoppage in operations owing to market variables such as low demand, prices or substitute products.- Decrease in income due to impact on turnover and market prices.

Country RiskRisks associated with global, national and regional geopolitical variables

Risks derived from socio-political conditions, currents and decisions of the countries and regions where we operate

- Monitoring of regulatory changes through expert third parties.- Monitoring of market and competitor behavior through the business intelligence process.- Inclusion of macroeconomic and geopolitical variables in the Master Plan analyses.- Active participation and leadership in industry associations.- Legislative management.

- Interruption of operations due to country risk such as security or expropriation.- Decrease in demand and sales owing to economic slowdown, political uncertainty or social factors.

Liquidity, Credit, Financial Statements and Taxes Risks associated with variables and �nancial management (liquidity, market, credit and exchange rate)

Risks stemming from changes and impacts caused by the behavior of different macroeconomic variables present in the countries and regions where we operate, as well as the �nancial decisions made by the company in order to interact with these markets. These risks can be grouped in liquidity, marked and credit, also including risks associated with �nancial reporting

- Individual and consolidated cash �ow forecast model. - Credit lines approved as liquidity contingency.- Investment manual.- Issuer quota model.- Periodic monitoring of customer account statement (credit limits, turnover and receivables balance).

- Impact on reputation due to negative �nancial performance or poor reporting .- Losses due to unrecoverable receivables.- Financial impact due to tax planning aspects.



36342835

- Monitoring of markets through business intelligence . - Strategy for strengthening sales force.- Expansion projects for cement and concrete plants, �eets, operations in intermediate cities.- Pricing committee and public affair committee.

- Decrease in market share.- Loss or reduction of income due to increased competition, substitutes or changes in market prices.- Stoppage in operations owing to market variables such as low demand, prices or substitute products.- Decrease in income due to impact on turnover and market prices.

Acts of GodImpact on operations due to acts of God

Interruption of operations due to natural disasters or weather conditions, such as snow, rain, hurricanes, earthquakes, �ooding and tornadoes, etc

- Model for measuring exposure and quantifying impact of acts of God.- Formulation, implementation and assessment of emergency response plans.- Insurance schemes.- Emergency and Joint Occupational Health Committee.

- Loss of human lives, injuries or diseases due to natural disasters.- Interruption of operations.- Losses due to impact on assets and facilities.- Negative effect on reputation due to impact on employees, assets, environment or facilities caused by a natural disaster or inadequate response strategies.

Fraud, Corruption and ML/TFRisks of fraud and/or misconduct of customers, suppliers, of�cials, partners and/or third parties

Misconduct by employees, customers, suppliers, partners or third party in relation to acts of fraud, corruption or money laundering and terrorism �nancing (ML/TF)

- Internal regulations and good governance code.- Corporate Conduct Code and Business Conduct Committee.- Transparency hotline.- Anti-fraud policy and fraud prevention program.- ML/TF prevention model.- Procurement Committee and Procurement Manual.- Training and internal and external communication plan.

- Serious impact on reputation.- Penalties, �nes and legal actions against the Company and its executives - closing of operations, prison for executives.- Impact on the value of shares.- Loss of customer.

Energy resourcesRisks associated with supply, reliability and cost variability of energy resources for operations and their ef�cient use

Risks associated with supply and cost variation of energy resources per ton of cement for operations such as coal, gas, petcoke, alternate fuels, electric energy and alternate energy, and ef�cient use thereof

- Energy policy.- Co-processing projects.- Monitoring of energy and heat consumption at plants.- Alternative sources for heat energy (gas, coal). - Installed self-generation capacity and connection to the National Electric Grid.- Impact analysis and strategies to face climate change.

- Decrease in pro�tability due to high operating costs related to price variability of energy resources.- Interruption of operations due to shortage of energy resources or high costs.- Environmental impact due to inef�ciencies in the use of energy resources.



37352936

Talent, knowledge and human rightsHuman resource management not aligned with the objectives and needs of the business

Risks associated with attraction, retention, development and management of talent, knowledge management and human rights

- Organizational Culture Project.- Talent management policy.- Risk-based human right model.- Virtual training platform EDUCA.- Internal customer satisfaction survey.- Training and education policies and programs, Academic Committee and sponsorship (corporate and technical).- Performance Management Program.- Collective bargaining agreement.- Attraction and recruitment program PILOS and Promoting Excellence.

- Impact on operating ef�ciency due to improper human resource management.- Impact on reputation and penalties due to violation of human rights.- Loss of knowledge.



37

GENERALMEETING OFSHAREHOLDERS

V.

CHAPTER V


a) Operation differences of the Meeting between the minimum requirements of current regulations and that de�ned by the Bylaws and regulations of the Company's Meeting.

b) Action taken during the year for fostering the participation of shareholders.

As best practices, Cementos Argos takes the following measures established for the bene�t of our shareholders and in compliance with our commitment to transparency and respect for the rights of our shareholders and investors, as contained in our Good Governance Code, which raised its standards for 2015:

Cementos Argos has the website web www.argos.co, where our shareholders may �nd all the information related to our Company and its performance. Moreover, this website has a mini site called “Corporate Governance - Meeting of Shareholders” that includes prior information for the Meeting of Shareholders and methods for contacting the Company. For the 2016 Meeting, all the Company's personnel received a communication by the Vice President of Legal and Institutional Affairs containing actions to ensure compliance with Memo 024 of 2010 issued by the Financial Superintendency of Colombia, which details behaviors from which legal representatives, administrators and other of�cial must refrain for holding the General Meeting of Shareholders.

For regular meetings, no less than 30 calendar days' notice shall be given and, for special meetings, no less than 15 calendar days' notice.

In any case, points such as “Miscellaneous,” “Other Matters” or otherwise that prevent from knowing previously and exactly all the business to be transacted at the respective meeting will not be included. This does not impede the inclusion of a point so that shareholders submit the proposals they deem appropriate.

During the terms for convening, shareholders may consult on the website and the Secretary General of the Company, the documents related to the session of the respective Meeting, including the minutes of the previous meeting.

When a meeting is intended for electing members of the Board of Directors, the information available to the shareholders shall contain the proposed candidates to such Board. For this purpose, the shareholders shall send their proposal for setting up the Board no less than �ve business days prior to the date of meeting. The proposed list of candidates for setting up the Board of Directors shall have attached a copy of the candidates' curriculum vitae and the Statement of Independence signed by the individuals in such condition.

If the Meeting is intended for addressing a substantial change in the corporate purpose, waiver of the preemptive right in the subscription of common shares, change of principal place of business, early dissolution, or divestment of the Company, such issues shall be expressly stated in the notice of convening. Additionally, these events will allow the right of withdrawal in the same terms and conditions as set forth by the law for events such as merger or spin-off.

The Company broadcasts the sessions of the Meeting via streaming (through a link on our website) so that those shareholders that cannot attend it are aware of its development.


39

c) Information to and communication with the shareholders.

d) Number of requests and matters on which shareholders have required information from the company.

Cementos Argos informs and communicates with its shareholders by the following means:

Website: www.argos.co

Shareholder Service Center of Fiduciaria Bancolombia on the phones:

Investor Relationship Management under the responsibility of Manuela Ramirez ([email protected])

Website of the Financial Superintendency through which Relevant Information is disclosed to the market:

www.super�nanciera.gov.co.

+ (57 4) 404 2371 + (57 4) 404 2362 + (57 4) 404 2453 + (57 4) 404 2451 + (57 4) 404 2452

CONCEPT

TAX CERTIFICATES 1067 504 1571

CHANGE OF DEPOSITOR 30 19 49

TRANSFER OF SHARES (OTC) 11 6 17

GENERAL CERTIFICATES 11 7 18

DIVIDEND PAYMENT UPDATES 4 12 16

DATA UPDATES 2 1 3

LIENS ON SHARES 0 4 4

INVESTIGATIONS / INFORMATION 2 0 2

PETITION OF INFORMATION(COLOMBIAN LAW RIGHT)

0 2 2

TOTAL DE SOLICITUDES ATENDIDAS 1127 555 1682

1Q – 2Q 3Q – 4Q GOAL

CONCEPT 1Q – 2Q 3Q – 4Q GOAL

TOTAL OF SHAREHOLDERS ATTENDED 71 86 157

CALLS

VISITS OF SHAREHOLDERS

58 66 124

13 20 33


40

Our regular session of the General Meeting of Shareholders took place in Barranquilla on March 28, 2016 at 10:00 a.m., at Country Club, Calle 76 N° 54 – 231, Barranquilla, Colombia, according to the convening performed under legal and bylaw requirements. We had the following quorum at this meeting:

Extract from minutes of the regular session of the 2016 General Meeting of Shareholders may be consulted on the Company's website: http://www.argos.co/ir/gobierno-corporativo/asamblea-de-accionistas

Calls were to consult about:

e) Information of attendance at the General Meeting of Shareholders.

Our shareholders at the General Meeting of Shareholders 2016 approved:

f) Details of the main agreements reached.

How to buy and sell shares in the Company Share price How to make transaction outside the stock exchange Dividends How to obtain the tax certi�cate How to change depositors Meeting of Shareholders

•The Report of the Board of Directors and the President The Financial Statements as at December 31, 2015. The Pro�t Distribution Project Board of Directors election because of resign of one of the Patrimonial Directors Statutory Auditor compensation Funds for social bene�t

SUMMARY CHART OF THE REGULAR MEETINGOF SHAREHOLDERS CEMENTOS ARGOS 2016

Total Shareholders 381

Total Attendees 23

Total Shares Represented 1.028.416.876

Total Outstanding Shares 1.151.672.310

Percentage of Represented Shares 89,30%


41

•The Report of the Board of Directors and the President The Financial Statements as at December 31, 2015. The Pro�t Distribution Project Board of Directors election because of resign of one of the Patrimonial Directors Statutory Auditor compensation Funds for social bene�t


42

TRANSPARENCY, ETHICSAND COMPLIANCE

VI.

CHAPTER VI


The Business Conduct Code and the Anti-Fraud, Anti-Corruption and AML/CFT Policies are mandatory for all employees, directors and related parties of Argos, regardless of geography, regional of�ce, or country where they are located. Thus, we ensure that all stakeholders are covered by these guidelines and policies, which shall always be observed.

Breaches of the Business Conduct Code by our employees involve application of procedures set out in the Internal Regulations in relation to penalties and even termination of the employment contract. In 2016, we continued with the implementation of changes made in 2014 to our money laundering prevention system and the respective trainings of the manual implementing the Risk Self-Management System for Money Laundering and Terrorism Financing (AML/CFT SCMS Manual), which includes policies and guidelines to prevent the performance of illicit activities in Argos and subordinate companies.

In 2016, an external audit was performed on the Good Governance Code company's compliance, which showed the highest possible rating, evidencing the strength of our governance framework. In the same way, we continue to work on maintaining the best standards at corporate governance level.

We have de�ned an internal structure to manage governance, transparency and conduct issues, led by the Governance and Procurement Committee made up of our CEO, and �ve of our nine vice presidents and the conduct of�cer acting as secretary, which generally establishes the measures to be taken depending on the type of misconduct and de�nes the strategy to address these issues, among others.

Throughout 2016 in compliance with the provisions of the Resolutions issued by the Special Administrative Information and Analysis Unit - UIAF, and since 2010, a quarterly report has been sent to said entity regarding suspicious transactions and cash operations, given our status as a Permanent Customs User and a Highly Exporter User. Just as monthly reports are sent from the subsidiary companies that are required to this type of report.

The Risk Self-Management System for Money Laundering and Terrorism Financing Manual, was updated in December 2014 with the approval of the Board of Cementos Argos and adopted, in turn, by The Colombian subsidiaries. This Manual contains the policies and guidelines to prevent illicit activities in CEMENTOS ARGOS S.A., and its Subordinated Companies, to properly manage this risk, in compliance with the applicable internal policies and procedures and applicable regulations.

Since 2015, we started the implementation of changes made to the Risk Self-Management System for Money Laundering and Terrorism Financing contained in the Manual approved by the Board of Directors in December 2014. As part of this implementation, in 2016 we provided training to employees and suppliers and validated the effectiveness of controls associated with various processes.


44

a) Communications and Training:

To facilitate the understanding of the ethical standards of our company, we designed and launched a course on our EDUCA e-learning platform. This course has the following modules: 1. Corporate Governance; 2. Code of Conduct; 3. Anti-Fraud, Anti-Corruption and AntiLAFT policies; 4. Competition Policy, and a module with The Diversity, Human Rights and Gender Equality Policies, which in addition to keeping our collaborators updated on these issues, allows us to easily verify the degree of knowledge through assessments at the end of each module. As of December 31, 2016, we trained in compliance issues in site sessions to more than 1,550 employees and virtually, that is through our EDUCA course, more than 4000 employees.

In the same way, we completed the construction – with the support of the Internal Communications Management - of our Communications Plan, in which we have the orderly planning of the communications made by the Compliance department to ensure the proper disclosure of the subjects in charge, this includes: articles, banners, activities, etc., in printed, electronic and virtual internal media; Likewise, we coordinate with the external communications management the contents that are published on twitter, Facebook and the corporate website, specially the Corporate Governance mini-site. In the same way, the iPad application has been used throughout the year through which the Board of Directors can review the information necessary for decision making, as well as review the minutes, comment on them, voting, among others.

Again, in 2016, we joined in the celebration of National Day for the prevention of money laundering on October 29 and we did the same on the international day against corruption on December 9th, with the issuance of special announcements referring to the issues. These commitments are disseminated within the Company to improve the awareness about the importance of money laundering, �nancing the terrorism, corruption and fraud prevention. Also, at the beginning of December 2016, we send to the suppliers and employees the cards with the Policy on the attentions and gifts that can be granted or received in accordance with our Code of Conduct.

In 2016, a presentation made by Transparency for Colombia Corporation was also made to the Steering Committee, with focus on Anti-corruption and some relevant related cases.

On the other hand, in the development of our Competition Policy, we trained our commercial teams in the regions of Colombia, Central American and the Caribbean, and the USA, so that our collaborators have absolute clarity of our commitment to free and fair economic competition, understood as a unilateral act or through agreements, impeding, restricting or hindering the natural development of the variables and conditions of competition in the market.

The Compliance Department also participated in the process of auditing the PRO System (Variable Remuneration System), investigating cases in which the PRO Subcommittee established that there could be elements related to fraud in the reporting to the company. In total, nine cases were investigated in this area, two of which ended with a suspension measure of the PRO 2016 System and the remaining ones with communications signed by the Conduct Of�cer on behalf of the Government Committee, which reminded the participants about the importance of managing the indicators of their individual boards and that any unauthorized change or modi�cation could be a violation of the Code of Business Conduct. Some of the people who had payments this year for compliance with these indicators were asked to return those amounts, which will be deducted from PRO 2016. There were 91 people who had any of these 9 indicators on their individual boards.

After the above and once the letters were delivered, an analysis of this process was made in conjunction with the PRO Subcommittee - since it was the �rst time it was carried out in the company - to determine learning and improvement opportunities to be implemented in future occasions, which are already implemented.


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b) Global Government and Compliance Program (GGCP).

One of the key factors in the reputation of Cementos Argos is its ability to conduct business with fairness, transparency, honesty and integrity and in compliance with the law and regulations, both domestic and foreign, that apply to the business.

Accordingly, in 2016, the �nal phase of the construction of the Company's Global Government and Compliance Program (hereinafter "GGCP" or "Program") was carried out, with the consultancy of Linklaters LLP, a Lawyers �rm from New York, USA, seeking to integrate the company's compliance practices with the best international standards into a document containing how to manage compliance risks, as well as their associated policies and procedures. This Program and updates to its main policies (Anti-Fraud, Anti-Corruption, Anti-Laundering, Competition, Data Protection, Gift Policy, donations and contributions) will be submitted for Board approval in the �rst quarter of 2017.

The GGCP was built with the purpose of providing a systematic framework to address issues of corporate governance and compliance at all levels of geography in which Argos has a presence. It is based on four basic principles: accountability, which requires Argos and Argos staff to take responsibility for their actions; Transparency and integrity, which requires Argos and its staff to act transparently and accurately disclose information to the market; Evidence, which requires that the effectiveness of Argos and Argos personnel be assessed in the implementation of program controls; And Adaptability, which requires Argos and Argos personnel to respond to changing environments by adjusting the Program accordingly.

The Program incorporates these principles - elements of Accountability; Transparency and integrity; Evidence; And Adaptability - and is an essential ingredient of the compliance culture that Argos promotes and works to maintain. It is the responsibility of all Argos personnel to comply with the policies of the GGCP and to act always in a manner consistent with the principles underlying it.


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c) Future activities and improvement plans.

In 2016, the company continued to update and expand its internal processes in relation to AML/CFT, Anti-Fraud and Anti-Corruption, as well as continue to work on the implementation of best practices applicable to the control of these risks and other resulting of illicit activities.

Our challenge in 2016 continue to be the expansion of in site training in the Colombia, Central American and Caribbean and United States Regions, as well as the standardization in the three regionals of the compliance processes as part of the implementation of the Global Governance and Compliance Program.

d) Political Contributions.In 2016 there were not political contributions by the company.

e) Transparency and claim mechanisms

During the last years, we have consolidated the Transparency Hotline as an ef�cient channel to report claims for irregular actions occurring in the conduct of business and as a consultation tool so that any person who has questions about our transparency and conduct processes may freely express their opinions, in their own name or anonymously.

This hotline may be accessed and used by employees, stakeholders and third parties, under the same conditions, thus facilitating reports in the regions where we operate.

Upon receiving reports from the Transparency Hotline, they are assigned, per their category, to investigation of�cials appointed by the Governance and Procurement Committee, and the business conduct of�cial is informed of such appointments. Of�cials are responsible for examining the cases brought to their attention, which, according to their relevance, shall be debated by the Conduct Operating Committee and/or the Governance Committee, whose members shall make the appropriate decisions pursuant to the guidelines de�ned.


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During 2016, we received 1259 communications classi�ed into the categories “Competence” “Communities”, “Con�ict of interest / others”, “Corruption” “Fraud”, “ML/FT”, “Labor Relations,” “Monitoring” and “information”, as follows:

i. Communications by categories 2015 vs. 2016.

CATEGORIES

Compliance Risks: Fraud, Corruption, AML, Antitrust

Labor Relations

Con�ict of Interest Self Statement

Communities

Monitoring

Information

94

54

62

61

35

953

REPORTS

Results of the Transparency Hotline - 2016

NOTE: It is clari�ed that the communications received are categorized as reported by the reports and does not necessarily mean that they are materialized events.

NOTE: Of the previous categories reported, it is clari�ed that the Corruption and the Money Laundering and Financing of Terrorism did not present cases that involved any contravention to AML/CFT or Anti-Corruption laws.

1000

800

600

400

200

0354457

266

2950 62525 961 31 52

254

953975

Antitrust

Conflicts of

interest/OthersCommunities

CorruptionML/FT

Labor Relations

MonitoringInformation

Fraud

Total year 2015: 1280 Total year 2016: 1259

Annual Comparisson of Communications by cathegory


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Regarding the declaration of con�icts of interest, which corresponds to the good performance of the collaborators or third parties in voluntarily declaring their situations of potential con�icts of interest, 62 communications were received, that is, 24% more than in 2015.

This type of report is considered positive since they show the level of commitment of employees who make these inquiries to prevent behaviors that are contrary to the policies of Cementos Argos.

iii. Number of cases a day (2015 vs. 2016).

iv. Number of communications by reported company (2015 vs. 2016).

ii. Con�icts of interest.

90

60

30

0

32

54

61

5645 39

64

53 53 50

159 1 0

Monday Wednesday Friday Sunday

Total year 2015: 261

Annual comparison of cases per day

200

250

150

100

50

0 1 2 8 6 1122 19

214

207 210

1861 1 1 12

Argos Antilles

Argos Dominicana S.A.

Argos Honduras

Argos Panamá

Argos Surinam

Argos USA Corp.

Canteras de Colombia S.A.

Cementos Argos S.A.

Fundación Argos

Logitrans S.A.

Zona Franca Argos S.A.

Total year 2015: 261

Annual Comparison of cases by reported company


49

The fact that Information - Company communications has decreased by 36.74% is considered positive. Nonetheless, Information - Customer Service communications increased by 146%, so there will be dissemination campaigns explaining the scope of the Transparency Line and its difference with the Customer Service Line. It is clari�ed that, although these communications are not of the object of the line, internally they are directed to the area of Customer Service to be attended.

The monthly average of communications was stable, as was the average of new cases, since in the last three years, this average has been above 20 monthly cases.

Contrary to what happened in previous years, in December 2016 the monthly average of cases was maintained, since 26 were recorded.

It is considered very positive that by the end of 2016, only 29.15% of the cases have been left open, an average that decreased compared to the year 2015, when it stood at 35.63%.

We highlight the receipt of communications by companies of the operations located in the different regions where the Company operates, as it demonstrates the effectiveness of the training and deployments with the data of the transparency hotline, as well as the trust in this tool.

Of the items presented in this report, we highlight the following aspects:

vi. Conclusions from the statistics of the Transparency Hotline.

v. Number of communications by type of relationship (2015 vs. 2016).

NOTE: The above categories were established in accordance with the statements made by the reporter. In "Others" are grouped those people who did not report belonging to a speci�c category.

450

360

540

270

180

90

0

338

165

226

65 55

481

5 14

440

155 158

437

Shareholders

CommunitiesCustomer

Contractor /

SupplierOthers

Employee

Total year 2015: 1280 Total year 2016: 1259

Annual comparison of communications by type of relationship to the company


50

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